Companies Act 2006, section 195

Property transactions: civil consequences of contravention

Part 10 A company's directors

(1)This section applies where a company enters into an arrangement in contravention of section 190 (requirement of members' approval for substantial property transactions).

(2)The arrangement, and any transaction entered into in pursuance of the arrangement (whether by the company or any other person), is voidable at the instance of the company, unless—

(a)restitution of any money or other asset that was the subject matter of the arrangement or transaction is no longer possible,

(b)the company has been indemnified in pursuance of this section by any other persons for the loss or damage suffered by it, or

(c)rights acquired in good faith, for value and without actual notice of the contravention by a person who is not a party to the arrangement or transaction would be affected by the avoidance.

(3)Whether or not the arrangement or any such transaction has been avoided, each of the persons specified in subsection (4) is liable—

(a)to account to the company for any gain that he has made directly or indirectly by the arrangement or transaction, and

(b)(jointly and severally with any other person so liable under this section) to indemnify the company for any loss or damage resulting from the arrangement or transaction.

(4)The persons so liable are—

(a)any director of the company or of its holding company with whom the company entered into the arrangement in contravention of section 190,

(b)any person with whom the company entered into the arrangement in contravention of that section who is connected with a director of the company or of its holding company,

(c)the director of the company or of its holding company with whom any such person is connected, and

(d)any other director of the company who authorised the arrangement or any transaction entered into in pursuance of such an arrangement.

(5)Subsections (3) and (4) are subject to the following two subsections.

(6)In the case of an arrangement entered into by a company in contravention of section 190 with a person connected with a director of the company or of its holding company, that director is not liable by virtue of subsection (4)(c) if he shows that he took all reasonable steps to secure the company's compliance with that section.

(7)In any case—

(a)a person so connected is not liable by virtue of subsection (4)(b), and

(b)a director is not liable by virtue of subsection (4)(d),

if he shows that, at the time the arrangement was entered into, he did not know the relevant circumstances constituting the contravention.

(8)Nothing in this section shall be read as excluding the operation of any other enactment or rule of law by virtue of which the arrangement or transaction may be called in question or any liability to the company may arise.

Read section 195 in the full Act → Definitions (6) Cases (7)

Definitions used in section 195

company

“company” means a company formed and registered under this Act, that is—

(a)

a company so formed and registered after the commencement of this Part, or

(b)

a company that immediately before the commencement of this Part—

(i)

was formed and registered under the Companies Act 1985 (c. 6) or the Companies (Northern Ireland) Order 1986 (S.I. 1986/1032 (N.I. 6)), or

(ii)

was an existing company for the purposes of that Act or that Order,

(which is to be treated on commencement as if formed and registered under this Act).

Defined in s.1(1) · see it in the full Act

(4) In this section and that Schedule “company” includes any body corporate.

Defined in s.1159(4) · see it in the full Act
director

In the Companies Acts “director” includes any person occupying the position of director, by whatever name called.

Defined in s.250 · see it in the full Act
holding company

(1) The Secretary of State may by regulations amend the provisions of section 1159 (meaning of “subsidiary” etc) and Schedule 6 (meaning of “subsidiary” etc: supplementary provisions) so as to alter the meaning of the expressions “subsidiary”, “holding company” or “wholly-owned subsidiary”.

Defined in s.1160(1) · see it in the full Act
connected with

(1) This section defines what is meant by references in this Part to a director being “connected with” a body corporate.

Defined in s.254(1) · see it in the full Act
connected

(1) This section defines what is meant by references in this Part to a person being “connected” with a director of a company (or a director being “connected” with a person).

Defined in s.252(1) · see it in the full Act

(1) This section defines what is meant by references in this Part to a person being “connected” with a director of a company (or a director being “connected” with a person).

Defined in s.252(1) · see it in the full Act
enactment

In this Act, unless the context otherwise requires, “enactment” includes—

(a)an enactment contained in subordinate legislation within the meaning of the Interpretation Act 1978 (c. 30),

(aa)an enactment contained in, or in an instrument made under, a Measure or Act of the National Assembly for Wales,

(b)an enactment contained in, or in an instrument made under, an Act of the Scottish Parliament, and

(c)an enactment contained in, or in an instrument made under, Northern Ireland legislation within the meaning of the Interpretation Act 1978.

Defined in s.1293 · see it in the full Act

Cases considering section 195 (7)

Neil Leslie Humphrey & Anor v Paul Craig Bennett & Ors

[2025] EWHC 448 (Ch) · 28 February 2025

Section 195 was applied as providing voidability and, separately, an account of gains and indemnity for loss. The court held that the proposed claim under section 195(3) was sufficiently arguable for derivative proceedings, and that the later resolution did not necessarily affect those remedies. (see paras [72]-[82])

Stubbins Marketing Ltd v Stubbins Food Partnerships Ltd & Ors

[2020] EWHC 1266 (Ch) · 19 May 2020Interprets

Identifies the statutory liability to account for gains made directly or indirectly by the transaction. The claimant did not pursue a claim under this paragraph. (see para [362]) Applies the statutory indemnity for loss or damage resulting from the unlawful transaction. The court quantified recoverable losses by reference to the value of consideration and the causal connection with the transaction. (see paras [1]; [362]; [443]-[495]) Confirms that the statutory indemnity is concerned with loss or damage resulting from the transaction, requiring a sufficient causal connection and consideration of the value actually received. (see paras [443]-[495]) Identifies the connected purchasing companies’ liability for gains or losses resulting from the transaction. The claimant did not pursue a separate claim under this paragraph. (see para [362])

Fairford Water Ski Club Ltd v Cohoon & Ors

[2020] EWHC 290 (Comm) · 28 February 2020

Because restitution of Plot 11 was no longer possible, the court applied section 195 to impose financial liability for the gain or loss resulting from the contravention. Craig, Jane and Scott were jointly and severally liable for £30,808 (see paras [470]-[479]).

What each judgment says about section 195 is in the case-law panel in the full Act.

Amendments and notes

7 notes from legislation.gov.uk

Modifications

  1. C287Ss. 190-196 modified (1.3.2016) by The NRAM plc (formerly Northern Rock plc) Consequential and Supplementary Provisions Order 2016 (S.I. 2016/114), arts. 1(1), 7(1), (3), Sch. para. 1(h)
  2. C288Ss. 190-196 modified (16.7.2026) by The Modification of the Law (British Steel Limited Property Transfer) Regulations 2026 (S.I. 2026/833), regs. 1(2), 6(2), Sch. para. 1
  3. C305Ss. 190-196 modified (22.2.2008) by The Northern Rock plc Transfer Order 2008 (S.I. 2008/432), art. 17(1), Sch. para. 2(h)
  4. C306Ss. 190-196 modified (8.00 a.m. on 29.9.2008) by the The Bradford & Bingley plc Transfer of Securities and Property etc. Order 2008 (S.I. 2008/2546), art. 13(1)(3), Sch. 1 para. 2(h)
  5. C307Ss. 190-196 modified (9.30 a.m. on 7.10.2008) by The Heritable Bank plc Transfer of Certain Rights and Liabilities Order 2008 (S.I. 2008/2644), art. 26, Sch. 2 para. 2(h)
  6. C308Ss. 190-196 modified (retrospective to 30.3.2009 at 8.00 a.m.) by The Amendments to Law (Resolution of Dunfermline Building Society) Order 2009 (S.I. 2009/814), arts. 1(2), 7, Sch. para. 2(h)

Commencement

  1. I54S. 195 wholly in force at 1.10.2007; s. 195 not in force at Royal Assent see s. 1300; s. 195 in force at 1.10.2007 by S.I. 2007/2194, art. 2(1)(d) (with saving in art. 12 and subject to transitional adaptations specified in Sch. 1 and with transitional provisions and savings in Sch. 3) this amendment is subject to savings and/or transitional provisions, see the commentary.